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The Federal Reserve has proposed that the largest U.S. banks keep enough easily sold assets in reserve to get through a monthlong credit drought. The proposal is stricter than a Basel III measure adopted in January. The plan would most affect banks with more than $250 billion in assets and would kick in by 2017.

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The Treasury Department's Office of Financial Research said in a working paper that a bank-liquidity rule being implemented by US regulators could have unintended consequences that threaten the financial system's stability. Because the US liquidity rule is more volatile and difficult to interpret than the looser global standard, banks may feel the need to publicly announce that they have fallen short of it, even if not required to do so by regulators, the OFR said. Alternatively, banks may feel pressured to maintain liquidity above the standard during a crisis, OFR said.

Virginia and Alaska, as well as Holyoke, Mass., have made last-minute appeals to the Federal Reserve asking that a bank-liquidity proposal treat municipal bonds more favorably. As written, the rule would disqualify municipal bonds as "high-quality liquid assets."

U.S. regulators are scheduled to complete a liquidity rule for banks next week. The rule likely won't consider municipal bonds as high-quality assets, so they wouldn't count toward the requirement, sources say. The measure could lead banks to reduce holdings of municipal bonds.

Criticism that Basel III rules, which require banks to hold more capital against possible losses, are too complex is prompting the Basel Committee on Banking Supervision to re-examine the rules. "A vigorous public debate has developed recently as to whether the Basel regulatory framework strikes an appropriate balance among different desirable characteristics: simplicity, comparability and risk sensitivity," Chairman Stefan Ingves said.

China is having a hard time limiting new bank lending to this year's $1.13 trillion target, said Hu Xiaolian, a deputy governor of the People's Bank of China. He said China will use its many monetary-policy tools to intensify liquidity management and bring the expanding supply of money and credit under control.